Journal article
Financing Major Investments: Information about Capital Structure Decisions
REVIEW OF FINANCE, Vol.18(4), pp.1341-1386
07/01/2014
DOI: 10.1093/rof/rft036
Abstract
We evaluate US firms' leverage determinants by studying how firms paid for 2,073 very large investments between 1989 and 2006. This approach complements existing empirical work on capital structure, which typically estimates regression models of leverage for a broad set of firms. Because large investments are mostly externally financed, security issuances should provide information about managers' attitudes toward leverage. We find that issued securities move firms toward target debt ratios. Firms also tend to issue more equity following a share price run-up, consistent with both the tradeoff hypothesis and managerial efforts to time market sentiment. We find little support for the standard pecking order hypothesis.
Details
- Title: Subtitle
- Financing Major Investments: Information about Capital Structure Decisions
- Creators
- Ralf Elsas - 1Institute for Finance and Banking, LMU München, 2Department of Finance, University of Florida, and 3Department of Finance, University of IowaMark J. Flannery - 1Institute for Finance and Banking, LMU München, 2Department of Finance, University of Florida, and 3Department of Finance, University of IowaJon A. Garfinkel - University of Iowa
- Resource Type
- Journal article
- Publication Details
- REVIEW OF FINANCE, Vol.18(4), pp.1341-1386
- Publisher
- Oxford Univ Press
- DOI
- 10.1093/rof/rft036
- ISSN
- 1572-3097
- eISSN
- 1573-692X
- Number of pages
- 46
- Language
- English
- Date published
- 07/01/2014
- Academic Unit
- Finance
- Record Identifier
- 9984380458102771
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